Declared dividends are a way to distribute a company's profits to its stockholders. They are not an expense of doing business, nor are they a legal obligation that a company must pay. Dividends are recorded as a liability because they represent the company's obligation to pay its stockholders.

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Declared Dividends

Question 42

Multiple Choice

Declared dividends:

A) are an expense of doing business.
B) are not a legal obligation that a company must pay.
C) are a way to distribute the company's profits to its stockholders.
D) are not recorded as a liability because they are not an expense of doing business.

Correct Answer: